Shares in Ford Motors sank to their lowest point for more than 10 years after Credit Suisse First Boston (CSFB) downgraded the company and halved its price target for the stock.

Ford's bonds also fell sharply.

It was one of the worst days for the world's number two carmaker and for Bill Ford Junior - great-grandson of the company's founder - since he took over as its chief executive.

All of the US automotive sector, which CSFB downgraded across the board, was hit because of fears about the outlook for sales and the shaky US economy.

Debt struggles

Ford was worst affected among the major auto industry players after CSFB raised concerns about the company's ability to maintain its investment grade credit rating.

The bank said it was cutting its price target for the carmaker to $10 from $20.

Ford and its finance arm are the largest US issuers of corporate debt and a downgrade to junk status for the 99-year-old business would be nothing short of disastrous, according to industry analysts.

The total debt of the company, which is struggling to implement what some industry watchers deride as a lagging turnaround effort, stood at $157 billion at the end of 2001.

Making progress

Fears about Ford's credit rating have been exacerbated by mounting concerns about its pension fund liabilities and by worries about the profitability of its luxury car division, which includes Volvo, Land Rover and Jaguar, CSFB said.

Ford's shares closed down 75 cents, or 8.82%, at $7.75 on the New York Stock Exchange.

They had earlier dropped to $7.51, the lowest since December 1991.

But CSFB credited the company with making "better-than-expected progress on its cost reduction efforts this year," after last year's loss of $5.45 billion.

Modest profit

Moody's Investors Service and Standard & Poor's, the two major U.S. credit rating agencies, both said that market speculation about a downgrade of Ford or its finance unit, Ford Motor Credit Company, was inconsistent with their ratings view.

"It's our view that Ford is basically a sound company," said S&P auto analyst Scott Sprinzen.

Ford spokesman David Reuter said the positives at Ford included its liquidity, with nearly $25 billion in cash on its balance sheet, and a "more than manageable debt situation".

He also said the company was on track with its restructuring plan and expected to make a modest profit this year.